Over the next few years, more companies will be migrating from their legacy ERP systems to SAP S/4HANA. A significant number of companies either have plans to move to SAP S/4HANA or are actively in the process. Recently, ASUG collaborated with DSAG to examine the two user groups’ members, and get a sense of their adoption journeys. A third of the ASUG members in this research have concrete plans to move to SAP S/4HANA, while 47% of DSAG members are in the same spot. About a quarter of each (22% of ASUG members and 23% of DSAG members) are already in the process of moving to SAP S/4HANA.
Making this move represents a significant upgrade from legacy ERP systems, though it allows customers to do more and simplify their business processes. ASUG sat down with Nitin Singh, author of “Introducing the Technical Foundation of SAP S/4HANA.” The book explains how SAP S/4HANA’s new technical architecture benefits customers and can drive business improvements. We talked about the technical innovations in SAP S/4HANA and how customers can effectively use them to drive ROI.
Jim: What are some of the key aspects of SAP S/4HANA’s architecture design that both future and current users should be aware of as they either begin using the solution or thinking about implementing it in the future?
Nitin: SAP S/4HANA is the result of several innovations and simplifications happening at the same time. There have been improvements in almost every aspect of software architecture—communications, data storage, data retrieval. All of these innovations have resulted in faster processing of transactions, resulting in more automated and faster processes. Additionally, the key guiding principle of SAP S/4HANA architecture was to move data-intensive processing from the application server to the database server. This leads to faster execution of processes.
At the same time, other simplifications around data table structure and removal of table joins (a way to view values and information in a table format) have resulted in a simpler data model that provides real-time access and calculations. Real-time calculations and faster processes opened numerous possibilities of process executions, which resulted in the rise of the intelligent ERP. Some of these innovations include universal ledger, predictive applications (predictive delivery delay), sales order monitoring apps, and intelligent MRP with integrated capacity checks.
Users should take full advantage of these improvements. Some users have replicated old legacy processes to the new SAP S/4HANA system, which is not the best use of the modern ERP. I would recommend being open to bringing in the best practices delivered with SAP S/4HANA to take advantage of these innovations.
Jim: What are some of the key differences between SAP ECC and SAP S/4HANA architecture?
Nitin: Key components of SAP S/4HANA architecture are database tables such as row and columnar store, SAP S/4HANA ABAP server with transactional logic and analytics, and the user experience consisting of SAP Fiori apps and screen personas.
There are some key differences between SAP ECC and SAP S/4HANA. First, table joins needed nested loops with SAP ECC and are replaced by simple SQL queries in SAP S/4HANA. Another innovation between the two solutions is moving application logic to database procedures and consuming them via CDS views in SAP S/4HANA. SAP S/4HANA has transactional logic and analytical capabilities co-existing in SAP S/4HANA ABAP server, performance improvements due to in-memory computing, and embedded analytics within the core ERP.
Embedded innovation opens a lot of doors. Now, robotic process automation (RPA), ML, blockchain, and situation handling are all possible by leveraging these embedded innovations. A lot of predictive use cases are now possible in the system because we are embedding innovations. Take RPA, for example. You can automatically create a lot of documents like sales orders, purchase orders, or even automatic invoicing.
Jim: How are conversational AI and ML used in the SAP S/4HANA architecture?
Nitin: Conversational AI is a computer’s ability to interact with a person while imitating the behavior of a human. SAP S/4HANA supports integration with a digital assistant so that the user can get their work done more efficiently. SAP Conversational AI also saves those chats. The key value proposition of SAP Conversational AI is to identify the context of users’ issues. This capability of connecting business context with application data goes a long way in resolving users’ questions.
In terms of ML, there are lots of use cases that are now directly enabled in SAP S/4HANA. ML helps the customer make better decisions while running their processes optimally. It supports your next best action by discovering patterns and unknown associations between data sets that are saved into your tables. ML models can look through the trends and patterns of that data and predict the future. These embedded innovations support new intelligent applications to get much-needed data insights, so they can predict future scenarios.
Jim: How has the user experience changed in SAP S/4HANA?
Nitin: User experience is one of the most key drivers of SAP S/4HANA adoption. If your UX is not good, your software will not be adopted—no matter how good it is. UX has always been the most important KPI when determining the success of an ERP implementation. Old SAP UI used to be a thick client-based SAP GUI (graphical user interface), and there was a critical need to redefine the whole user experience provided by SAP applications.
In 2013, SAP Fiori was launched, and it’s the de-facto UX platform for SAP. SAP Fiori focuses on the simplifications of the user experience. The key enablers for the Fiori UX are role-based design, the responsiveness of the apps, and coherent design. All of the innovations I’ve discussed here and these intelligent technologies are now Fiori UX-enabled.
Jim: Why is integration so important to SAP S/4HANA implementations?
Nitin: A lot of content of the book is based on my experience working on more than 70 customer engagements across 20 countries to implement SAP. From my experience, no ERP implementation is complete unless you integrate the solution with many of the organization’s satellite systems. You need to connect with your customers, partners, banks, and even “things.” Integration has become incredibly important. I strongly encouraged customers to spend a lot of time defining their integration strategy and architecture. SAP S/4HANA has a lot of those native connectors, so there are a lot of integration possibilities.
I have highlighted different data integration patterns in my book, including on-premise to cloud, users to cloud, or users to on-premise where your UX system talks to your on-premise system. There are also B2B integrations where you connect with your external partners like banks or suppliers. The best way to create an integration strategy is to figure out what integration patterns you are using and what are the corresponding integration use cases. Once you determine those, you can start identifying which is the right tool for your organization. SAP S/4HANA provides a lot of those native connectors with your cloud. Many systems like SAP Ariba, SAP Concur, and SAP SuccessFactors can natively integrate with SAP S/4HANA.
Jim: How should customers go about mapping architecture changes related to their business process changes?
Nitin: There are quite a few architecture changes and business process changes enabled in SAP S/4HANA. I recommend that my customers create a business-driven architecture rather than an IT-driven architecture. First, you need to figure out why you are implementing a process. A process is executed to satisfy specific capabilities your business needs to deliver so that you can support your company’s vision, mission, and objective. This is a great structure to identify which processes are key to your business.
I always suggest my customers do a capability assessment and figure out what are the key areas of capabilities, which you want to design, and what are your core capabilities for your industry. Based on that information, you can figure out if you are facing any key challenges in realizing that capability, and how to address those challenges. Based on that assessment, you can start mapping capabilities to the SAP S/4HANA best practices, which gives you a structured way of connecting your business model, operating model, and capabilities.
With intelligent innovations available with SAP S/4HANA, it’s now possible to reengineer antiquated processes with predefined best practices along with embedded innovation. These innovations should be considered while defining solution architecture.
Jim: Can you tell us about the reimagined business model and how customers can use it to improve their businesses?
Nitin: I define a business model as a summarized view of demonstrating your company's business rationale by highlighting key building blocks. Anything that can give you a new value proposition or bring you additional revenue streams, reduce the cost of operations, or optimize your activities could be classified as an enabler of a reimagined business model.
There are different patterns that I discuss in my book. One example is an outcome-based model. Many of our customers are moving toward a model where they offer their customers outcome-based models, where they pay for the business outcome rather than the actual product or services. That model can be enabled in SAP S/4HANA using a subscription order management capability enabled within the system.
The nutshell of what I talked about in this chapter is that anything that can positively impact your business model can be classified as a reimagined business model. Because SAP S/4HANA is powerful—not only in architecture but also in enabling the business process itself—a lot of those new capabilities can enable your business model improvement as well.
Jim: Can you walk us through a case study of end-to-end architecture for SAP S/4HANA?
Nitin: This is my favorite section of the book. A company’s decision to implement an ERP system and define its architecture ties back to its business and operating models. That operating model is nothing but the business capabilities it needed to provide a value proposition to customers. Enterprise architecture as a function helps in creating a capability map, identifying what challenges you have, and mapping your future direction. All of these become key ingredients of business architecture. To enable a business architecture, you need systems and solutions. That’s where the application architecture comes in. You can then start mapping those capability requirements, the capability gaps, or the current challenges to the enterprise applications.
We have now connected the dots from your business model to the operating model capabilities and finally to your application architecture. Next, you need to develop your UX strategy and architecture. You want to make sure that you provide a consistent, harmonious UX—not only to your internal users, but also to your external users and customers. Then, as I talked about integrations, you also need to make sure you create your integration strategy and architecture.
It’s essential to have an overarching security strategy and architecture. Last, but not least, you need a very detailed technical architecture, which outlines deployment models, establishes how much network bandwidth, and where exactly your infrastructure should be. All of these provide a single thread that connects everything in your architecture.